Gambling for education


In a free society dedicated to personal liberty, people should be able to gamble.

With gambling, though, there are fairly predictable costs that arise. Because of the variety of social services that our government provides, many of these costs are borne by the public as a whole. In other words, allowing people the freedom to gamble also means that many others must pay to clean up the mess that some will make of their lives. This cost outweighs the benefit of the freedom to gamble. If we could isolate the harm that problem gamblers cause so that everyone else wouldn’t have to pay to fix it, that would be a different matter.

Even if we could isolate the harm from gambling to those who choose to gamble, innocent victims are harmed — the children of pathological gamblers, for example.

Those who wish to gamble should be able to do so, then, if the harm the problem gamblers cause can be contained. But our state provides so many social services that containing the cost is likely impossible.

If we are to allow gambling in Kansas, we should not tax it in the way being proposed. Why? If casinos in Kansas are successful, they will generate a lot of tax revenue. The government becomes dependent on that tax revenue, and thereby forms a de facto partnership with the casinos. It will be in the state’s interest to have more gambling. The state will likely advertise and promote the casinos, just as it advertises and promotes the Kansas lottery.

We should also keep in mind that the amount it seems like casinos might generate ($150 million per year is a figure I often hear) is a relatively small amount. Kansas tax revenue for fiscal 2005 was $4,632.5 million, so revenue from casino taxes might be about 3.2% of total Kansas tax revenue. But the real percentage is even less, as total spending by the state that year was over $10,813 million, so the amount raised from gambling is less than 1.4% of Kansas total spending. The incremental gain — what really matters — is even less, as much if not all of the money spent gambling is money that would have been spent elsewhere, likely generating tax revenue for the state there.

Of course, this money is for the children, as casino advocates say. We must have casino gambling so that our children can be properly educated, they say. But money is fungible. To say that money arising from a specific source only benefits a given cause is illusory. It makes as much sense as saying the money I earn on Monday and Tuesday goes to the mortgage payment, the money earned on Wednesday for food, Thursday for retirement, etc.

So the real question, then, is do we want to unleash on this state the problems of casino gambling for the vanishingly small benefits it may bring? That is, if we can somehow control and contain its social costs? For me, the answer is “no.”

Some Research on Gambling

If you are interested, a good article to read is an excerpt from The Business-Economic Impacts of Licensed Casino Gambling in West Virginia: Short-Term Gain but Long-Term Pain. Some quotes:

From a business-economic perspective, the main issue involved in legalizing various forms of gambling is whether gambling activities constitute a valid strategy for economic development. While the dollars invested in various legalized gambling projects and the jobs initially created are evident, the industry has been criticized for inflating the positive economic impacts and trivializing or ignoring the negative impacts (Goodman 1994). The industry’s tendency to focus on specialized factors provides a distorted view of the localized economic positives, while ignoring the strategic business-economic costs to the state as a whole (such as West Virginia) and to different regions of the United States (California Governor’s Office 1992, Kindt 1995). In 1994, all of the various experts who testified before the U.S. House of Representatives Committee on Small Business criticized the impacts that casino-style gambling activities inflict upon the criminal justice system, the social welfare, system, small businesses, and the economy (Congressional Hearing 1994). Utilizing legalized gambling activities as a strategy for economic development was thoroughly discredited during the hearing.

In recent economic history, legalized gambling activities have been directly and indirectly subsidized by the taxpayers. The field research throughout the nation indicates that for every dollar the legalized gambling interests indicate is being contributed in taxes, it usually costs the taxpayers at least 3 dollars– and higher numbers have been calculated (Politzer, Morrow and Leavey 1981; Better Government Association 1992; Florida Budget Office 1994). These costs to taxpayers are reflected in: (1) infrastructure costs, (2) relatively high regulatory costs, (3) expenses to the criminal justice system, and (4) large social-welfare costs (Illinois Governor’s Office 1992). Accordingly, several state legislators (e.g., in South Dakota) have called for at least partially internalizing these external costs by taxing all legalized gambling activities at a straight 50 percent tax rate.

Specifically regarding education, which is a driving force for considering gambling at this moment.

Gambling activities and the gambling philosophy are directly opposed to sound business principles and economic development. Legalized gambling activities also negatively affect education– both philosophically and fiscally (Better Government Association 1992; Clotfelter and Cook 1989). Adherence to a philosophy of making a living via gambling activities not only abrogates the perceived need for an education, but also reinforces economically unproductive activities (and is statistically impossible since the “house” always wins eventually). In states with legalized gambling activities which were initiated allegedly to bolster tax revenues to “education,” the funding in “real dollars” has almost uniformly decreased.

From the conclusion:

Increasingly, taxpayers and businesses are beginning to realize that, as Professor Jack Van Der Slik has summarized for much of the academic community, state-sponsored gambling “produces no product, no new wealth, and so it makes no genuine contribution to economic development” (Van Der Slik 1990). Business-economic history supports this proposition. The recriminalization of gambling activities occurred 100 years ago after a brief gambling boom following the Civil War. Most state legislatures utilized constitutional provisions to recriminalize gambling, because lawmakers wanted to make it as difficult as possible for future generations to experiment with the classic “boom and bust” cycles and the concomitant socioeconomic negatives occasioned by legalized gambling activities. To paraphrase Georg Hegel’s common quote, “those who forget the lessons of economic history are condemned to relive them” (Bartlett 1968).

Even the supporters of gambling concede there are social costs. In a report prepared for the Wichita Downtown Development Corporation and avaible to read by clicking here, we read: “At a cost of $13,586 in social costs for each [pathological gambler], the annual burden on the community could range between $71 and $106 million.” Of course, these costs are offset by benefits, the study says. These costs are not just dollar costs, however. They are human costs paid in suffering, often by innocent family members of the problem gamblers.

Politicians’ Confusing Attitudes Towards Gambling

The attitude of some politicians is quite confusing. For example, as reported in The Wichita Eagle on June 16, 2005, regarding Senator Donald Betts:

Sen. Donald Betts, a Wichita Democrat, said he is aware of gambling’s social impact, having grown up in Las Vegas.

“Beyond the neon, there was a grim reality of what gambling does to a community,” he said.

Still, he said, he likely would support a gambling bill if it is brought up next week.

“In my district, I believe it’s a lot better choice than increasing taxes,” Betts said. “My constituents are calling me and asking me, when are we going to get the casinos?”

(If I were as clever as Rush Limbaugh, I suppose I might make some crack about what a guy named Betts thinks about gambling.)

There are other examples of politicians saying they know there is a downside to gambling, but we’re going to have it anyway, they say.


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